THE POLITICAL LANDSCAPE AT THE BEGINNING OF 2012

Barry Manilow, musician and political prognosticator recently said, “I agree with everything that Ron Paul has said and what he stands for, but I love Obama, voted for him in 2008 and will vote for him again in 2012.” This is one diverse guy but most of the country is very politically polarized and this is impacting everything Congress and the Executive branch does. The polarization will also have a big impact on the 2012 election. And the reasons are clear. If the economy stays the same or worse, Obama will likely lose. If there is even a reasonable improvement, he will likely win. Both parties know this and are fighting to wait for big changes after the election.

With that, let’s look at the pros and cons of Obama’s reelection prospects. President Obama’s approval rating is 45%, 48% disapproval. No one has been reelected in modern times without being very close to a 50% approval rating in the year of the election, like right now. To put this in perspective, Obama is in better shape than Jimmy Carter but not quite as good as George W. Bush. This would argue for a very close election. And with unemployment still at 8.5% and underemployment far higher than that, the economy will not help Obama unless there is a big turnaround in the next two quarters. This is not terribly likely.

Next, the Republican primary vote is up 3% from 2008. This is not astronomical but it is a good sign that Republicans are motivated. Of course the early nastiness of the primaries make all candidates look weak now but improvement for Republicans is likely if Mitt Romney emerges after South Carolina as the virtually certain nominee. This will help enormously but only if the other Republicans get behind him. Newt Gingrich and Rick Santorum will have to mend fences with Romney. John Huntsman has already endorsed Romney, but Newt Gingrich and Ron Paul will have to get behind Romney. Another fear is that Ron Paul will run a third party candidacy. But conventional wisdom suggests that he won’t run against Romney because it would kill his son’s political ambitions. Rand Paul is Kentucky’s junior Senator and he will not do well if his father runs a third party libertarian style campaign that would hurt the Republican Party. But, Romney will have to put a fiscal conservative on the ticket to give Paul some credit for his following in the Tea Party and among other Republicans. This will be very important.

Obama has other advantages including incumbency and no primary opponent. Incumbent presidents that have been defeated, and remember 78% have been reelected, have always had difficult primary fights. Gerald Ford had Ronald Reagan, Jimmy Carter had Ted Kennedy and George H.W. Bush had Patrick Buchanan make very strong runs against them, hurting them in the general election. Obama will not have to lift a finger within his own party. This is very helpful to his reelection chances.

Obama will have roughly $750 million to $1billion in the bank. As we know, Romney is still spending money, and lots of it, to win the Republican primary. The quicker he secures the nomination, the sooner he can raise money against Obama. Obama has a big head start and a phenomenal organization that is even better than his ‘08 team, and that is saying something. But Obama’s success still will depend on the economy, and right now that is not his strong suit.

Ray Fair, the Yale Professor who has analyzed every president since Woodrow Wilson in 1916, gives President Obama a 51.7% chance for reelection. If the economy grows at 3.69% over the next three quarters, his chances go up to 52% but if the real growth is 1.25%, Obama’s chances drop to below 50%. If the payroll tax extension continues for all of 2012, this will boost the economy by 0.9%, which would really help the president. Clearly we can see why he continues to fight so hard for this and why Republicans resist. The Republican quandary is that a bad economy makes Obama very vulnerable but if they are obviously obstructionist, they can be blamed for the weak economy, which would hurt them. This is why Republicans will resist any real tax or entitlement change until after the election.

Even though Congress has an 83% disapproval rating, they are counting on this not to cause them to lose their majority in the House. It is important to remember that just before the 2010 election, 45% of all registered voters said they would vote out very member of Congress including their own; and today this number stands at 54% of all registered voters saying they would vote out all members including their own. This would be fatal in a midterm election, as it was for then Speaker Nancy Pelosi’s majority as Democrats lost 63 seats. This was the highest loss in a midterm since Franklin Roosevelt in 1938. But in a presidential election, the president becomes a far bigger factor. Thus, if Obama wins or loses a close election, it is very likely Republicans will fare reasonably well. After all, even if he wins, it will likely be a squeaker. Since 65.3% of all registered voters think the country is on the wrong track and only 25.3% think the country is on the right track, Obama will have problems since he is the country’s leader.

Romney will have big problems too since he does not truly inspire the Republican base. He is a blue blood, a Mormon, a former Massachusetts governor, a flip flopper on big social issues like abortion and gay marriage and the Bain venture capital story won’t help with the common man vote at all. He is also a bit stiff, formal and not terribly warm and fuzzy. On a demographic basis he has another problem, a large number of under 40 year old non-college educated Republicans voted for Ron Paul. If they are not appeased, they simply won’t vote. It is easy enough to say that Obama’s base of young, liberal, idealistic young Democrats will not vote either but Romney does not have a huge appeal. This could be a low turnout election won by the campaign with the best grass roots ground game.

The Senate races favor Republicans because 23 of the 33 seats up for reelection are Democratic and several Democrats, including Nebraska’s Ben Nelson, will not seek reelection. These are factors that favor a Republican takeover albeit by a very small margin. Republicans need only pick up 3 seats to take the majority and this looks likely. The House will also likely stay Republican even though many of the Tea Party freshmen are not in great shape. But redistricting, which occurs every ten years, favors the Republicans in most of the States, but not all of them. But they will suffer some losses simply because many of the Freshman Republicans won in a big “throw out the Pelosi health care bums movement.” But their own obstructionist behavior regarding the debt ceiling and other high profile disagreements with Democrats, have turned some voters off. The House will likely remain Republican but they will lose 10 seats or so, in all likelihood. They will still probably have a 15 seat majority.

The pundits say to watch 7 races closely in 2012 as a harbinger of Republican versus Democratic leanings. First, will Wisconsin’s high profile, anti-union Governor survive a recall election? His odds are good but if he loses it would be a big defeat for the GOP. Will consumer expert Elizabeth Warren defeat Freshman Massachusetts Republican Scott Brown? Brown took Ted Kennedy’s seat in a huge win for the GOP but Elizabeth Warren is raising a huge amount of money and Brown will have a tough time coming back. If he loses, it would be a big win for the Democrats. The Virginia Senate race between heavy weights Tim Kaine and George Allen will be important to both parties. Kaine was a governor and head of the Democratic National Committee. Allen was a governor and a senator, who is mounting a comeback. This race is very important to both parties and is a toss-up state for the president. President Obama became the first Democrat to win Virginia since LBJ in 1964 and Republicans with a new governor from their party are working mightily to get it back. In Missouri, Democrat Claire McCaskill will have a tough time getting reelected and Obama will have a hard time winning in the Show-Me state. North Carolina’s Democratic Governor Bev Purdue will also have a very tough race against Charlotte Mayor Pat McCrory. This is another important state that Obama won, and Republicans will work hard to get it back.

In the House, redistricting has created some situations where incumbents will have to run against one another and many districts have been changed significantly. North Carolina Democrat Heath Shuler and Illinois Republican Joe Walsh are examples of members who will have a difficult time getting reelected. But many other incumbents will have a tough run in this economic climate. And voters are discouraged because the parties are so divided politically. This may hurt incumbents that are already weakened by having to run in substantially changed Congressional districts.

It will also be interesting to see if Romney can woo the blue collar white voter who is fed up with Obama’s economic policies. Many of these voters see the $2 trillion in stimulus money only helping bankers and Wall Street. They are ripe for the taking but can a blue blood who made his money as a venture capitalist capture these voters? It is clear the old message that helped the GOP with blue collar voters won’t work this time. Romney will have a hard time running on “God, guns and gays.” Romney will be viewed as a liberal or at best a flip flopper on these issues, so the economic message will have to carry the day.

To that point, legislators will begin looking at the Farm Bill. As we know, agriculture has a good message to tell in that it has been a bright spot in an otherwise dim economic picture for the country. Regarding the Farm Bill, as 2012 begins, it appears that how to reform the Commodity Title of the Farm Bill, also known as Title 1, will be the focal point of Farm Bill discussions for the first quarter of 2012. American Farm Bureau Federation members, who had long opposed changes to the direct payment structure of the commodity title, voted on January 11 at their annual meeting in Honolulu, to eliminate direct payments and replace it with strong and effective safety net/risk management programs. These programs would protect producers from catastrophic occurrences while minimizing the potential for farm programs affecting production decisions.

This is a significant development as it will open the door to further negotiations with the Agriculture Committees to reform the safety net and crop insurance programs. The Farm Bureau will work on developing a proposal based upon this decision to submit to the Agriculture Committees, which will be considered simultaneously with what the National Corn Growers had submitted to the Committees this past fall during the Super Committee process. What will emerge remains to be seen, however, the acknowledgement by the Farm Bureau that direct payments will be eliminated will open the process in a way that will give House and Senate Members more leeway with which to consider safety net policy reform.

The House and Senate Agriculture Committees will begin scheduling Farm Bill hearings in mid to late February to debate these ideas. Several prominent Agriculture Committee Members have indicated that they hope that the Farm Bill will be completed by July of this year, given that any delay beyond that point will get too close to the Presidential election and thus limit the chances of the bill’s passage.

On a final note, there are always the “black swan” possibilities. For instance, in the 2000 election, it was revealed just before Election Day that George W. Bush was issued a DUI many years earlier in Kennebunkport, ME. This late hitting news likely cost him about 4 million evangelical Christian votes. And many Republicans fear that President Obama will bring Hillary Clinton on as his Vice President and ask Joe Biden to be Secretary of State. This could energize the female vote in a way that Republicans would have a hard time counteracting.

Election Day is still more than 10 months away, so lots can change but both parties seem dead set against doing much on Capitol Hill until the election is over.